Central Plains Power Company is considering an investment in wind farm technology to reduce its use of natural gas. Initial installation costs are expected to be $1,200 per kilowatt-hour of capacity. The wind turbine has a capacity of generating 2 megawatts per hour. A kilowatt-hour is 1,000 watts generated per hour and a megawatt hour is 1,000 kilowatts generated per hour.

Annual operating information related to the wind turbine project was developed as follows:

Wind capacity factor		25	%*
Operating cost per wind turbine megawatt hour		$10
Variable operating, fuel, and maintenance costs per natural gas megawatt hour		$95
Days per year		365

*A factor that measures the reduction from full capacity due to the variability of wind

a. Determine the initial investment cost of the wind turbine. $

b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to nearest whole dollar. $

c. Determine the net present value of the project assuming a 15-year life and 12% minimum rate of return. (Use the present value tables in Appendix A.) $